Podcast: Google Dilemma

By | July 28, 2020
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The BBC World Service Business Daily version of my piece on the Google Dilemma (The Business Daily podcast is here.)

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To listen to Business Daily on the radio, tune into BBC World Service at the following times, or click here.

Australasia: Mon-Fri 0141*, 0741

East Asia: Mon-Fri 0041, 1441
South Asia: Tue-Fri 0141*, Mon-Fri 0741
East Africa: Mon-Fri 1941
West Africa: Mon-Fri 1541*
Middle East: Mon-Fri 0141*, 1141*
Europe: Mon-Fri 0741, 2132
Americas: Tue-Fri 0141*, Mon-Fri 0741, 1041, 2132

Thanks to the BBC for allowing me to reproduce it as a podcast.

Podcast: The Real Revolution

By | July 28, 2020
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The BBC World Service Business Daily version of my piece on the rise of the smartphone (The Business Daily podcast is here.) 

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To listen to Business Daily on the radio, tune into BBC World Service at the following times, or click here.

Australasia: Mon-Fri 0141*, 0741

East Asia: Mon-Fri 0041, 1441
South Asia: Tue-Fri 0141*, Mon-Fri 0741
East Africa: Mon-Fri 1941
West Africa: Mon-Fri 1541*
Middle East: Mon-Fri 0141*, 1141*
Europe: Mon-Fri 0741, 2132
Americas: Tue-Fri 0141*, Mon-Fri 0741, 1041, 2132

Thanks to the BBC for allowing me to reproduce it as a podcast.

The Google Dilemma

By | January 16, 2012
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Once we lived in simpler times. Google was a search engine that made its money off ads that were based on what we searched for. Look for cocoa and you’d get an ad for hot chocolate alongside the search results. Google made lots of money from this and we got our hot chocolate.

This worked because the web was searchable. At the end of the 1990s there was no walled garden beyond the shrinking cabbage patches of early Internet service providers AOL and CompuServe: All the the web was there anxious to be indexed, to be searchable. Idealists wandered into the sunshine and spoke of a future when everything would be found and information would be free.

It was not to be. We’ve already seen some of the problems. When information is free—as in not in chains—people also expect it to be free—as in free beer. When we started relying on search engines to find what we needed online the process would only work if that information was free to Google and its ilk to index, which meant, for the most part, it had to be free to us to access. Result: Google made lots of money, and lots of news organisations had to die before new business models could be found.

But something else happened along the way. Google made its money from knowing us through what we searched for. We had a relationship with Google whether we realised it or not. Just by entering a search term we told them stuff about us, and that helped them help others to sell us stuff. We weren’t the customer; we were, in the now familiar argot, the product.

Then Facebook and twitter and other social networks came along and realised that the same could be true on a much bigger scale if we could be induced to enter a lot more information about ourselves. Soon our lives were online, including photos, videos, likes and dislikes, relationships, affiliations, locations, what we ate, wore, drank, listened to, bought, read.

All that data is even more valuable than the data Google collected on us. But the problem is that it’s not part of the web. Facebook is not really searchable outside Facebook—and it’s not very searchable within Facebook, if you’ve tried to find a link you remember sharing with someone back in October. So now Google is shut out of a big chunk of the web we thought would be forever open.

So Google invented its own social network. Well, two, but one failed: Remember Buzz, anyone? Google now has Google+ and in the past year it’s been pushing it so hard it’s beginning to look like Google has forgotten what made it good in the first place. Its most recent stunt: Incorporate a search on Google with a search of the Google+ network, which it calls, somewhat awkwardly, Search, Plus Your World.

The idea is simple: When you search for cocoa, you not only want a search of what the web has to say on the subject, but you are probably interested in what your friends on Google+ have to say on the matter, along with any photos and tidbits you may have shared yourself.

Many folk don’t like this. They not only feel Google has forgotten that simplicity and speed was what made the search engine the world’s default. They also question why Google assumes that its users are only interested in Google+, which is still a minor player in the social network stakes. Why no twitter, Facebook or other networks?

Google says these two giants aren’t playing ball, something both companies deny; it’s far from clear who’s telling the truth. But what is clear is that Google is grappling with a problem that threatens it more than anything thus far: The rise of social networks which it cannot access, and therefore not only limit its popularity as a search engine, but shut it out of lots of ad dollars.

Folk were already worried that Google was alienating users of its products—not just search, but documents, email, maps, RSS, calendars and the mobile operating system Android—by pushing them into joining Google+. Now they’re worried, in my view rightly so, that Google is jeopardising its core product, the one that makes it all its money, by fiddling search results to favor this new social network.

It’s unlikely, but if people start to abandon Google search in droves, the rest of the empire will collapse like those walled gardens of old.

The Real Revolution

By | January 15, 2012
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This is also a podcast, from my weekly BBC piece. 

While folks at the annual tech show in Vegas are getting all excited about a glass-encased laptop, the world’s thinnest 55″ TV and a washing machine you can control from your phone, they may be forgiven for missing the quiet sound of a milestone being crossed: there are now more smartphones in the world than there are ordinary phones.

According to New York-based ABI Research, 3G and 4G handsets now account for more than half of the total mobile phone market. Those old ‘dumb phones’ and the so-called feature phones–poor relations to the computer-type iPhone or Android device can–are now officially in decline.

This is, in the words of ABI Research’s Jake Saunders, “an historic moment.” While IDC, another analyst company, noticed that this happened in Western Europe in the second quarter of last year, Saunders points out: “It means not just mobile phone users in Developed Markets but also Emerging Market end-users are purchasing 3G handsets.”

So why is this a big issue? Well, a few years back it would have been hard to convince someone in an emerging market to shell out several hundred bucks for a phone. A phone for these folks was good for talking and sending text messages. That was a lot. And enough for most people–especially when the handset cost $20 and the monthly bill was even less.

Now, with prices falling and connectivity improving in the developing world a cellphone is so much more: It’s a computer. It’s an Internet device. It’s a portable office and shop front. It’s a music player. A TV. A video player. A way to stay in touch via Facebook and Twitter.

And for the industry these people in emerging markets are a life saver. For example: The developed world is pretty much saturated with smartphones. People aren’t buying them in the numbers they used to.

But that’s not to say the feature phone is dead. In fact, for some companies it’s still an important part of their business. Visionmobile, a UK based mobile phone research company, says that Nokia–busy launching its new Windows Lumia phones in Vegas–is still the king of feature phones, accounting for more than a quarter of the market.

And they just bought a small company called, confusingly, Smarterphone, which makes a feature phone interface look more like a smartphone interface. So clearly at least one company sees a future in this non-smartphone world. In a place like Indonesia, where the BlackBerry leads the smartphone pack, nearly 90% of phones sold in the third quarter of last year were feature phones, according to IDC.

So companies see a big chance for growth in these parts of the world. But they also need the spectrum. If you’re a mobile operator your biggest problem now is that smartphone users do a lot of downloading. That means bandwidth. The problem is that one piece of spectrum is for that 3G smartphone, and another is for your old-style 2G phone. The sooner you can get all your customers to upgrade their handset to 3G, the sooner you can switch that part of the spectrum you own to 3G.

So this is a big moment. We’re seeing a tipping point in the world’s use of cellphone use, from a simple, dumb communication device to something vastly more useful, vastly more exciting, vastly more lucrative. All those people moving over to smartphones

ABI Research reckons there’ll be 1.67 billion handsets sold this year. That’s one in four people buying a new device. Forget fancy Vegas. The real revolution just started.

The Browser Doesn’t Matter So Long As It Goes to Google

By | December 25, 2011
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The whole Google/Firefox issue is an interesting one: Google is the default search engine in Firefox because it pays to be there. The three-year deal expired in November 2011. Would they renew? Some thought no. They were wrong.

Not only has Google renewed the deal whereby it effectively bankrolls Firefox, but it’s the first time that it’s continued the deal after launching its own browser, and the first time it’s done so after Chrome is actually has as many users, according to some measures, as Firefox.

On top of that, there are reports from AllThingsD that the deal is worth $300 million a year, more than three times what they were paying under the previous arrangement. What gives?

Several theories:

We’re Partners

The official version is that Google and Firefox are buddies, after the same thing: the betterment of the web [ReadWriteWeb].

Bidding War

One is that Microsoft and possibly Yahoo! were after the deal. Makes sense: Microsoft is desperate to gain market share for bing, while Yahoo! is, well, desperate.

Eyeballs

Another theory has it that Google is basically after eyeballs, and doesn’t care how it gets them. Paying for them by getting to be the default search brings oodles of traffic. This is definitely true. I reckon that Firefox had as many as 500 million users in 2010. If 90% of those users don’t switch their default search that’s worth a lot of money to Google, and as ExtremeTech has pointed out, makes Firefox the biggest single source of traffic to Google (I calculate they paid 20 cents per user, whether or not they actually use Google.)

Antitrust

There are other theories. One is that Google is worried about antitrust issues [David Ulevitch, Twitter feed, via paris lemon] and therefore wants there to be a competitor about. This argument has some merit: expect Google Chrome/Chrome OS and Android to converge more and more, which is bound to attract the attention of regulators.

There’s no question that Google benefits any which way this goes.

  • It’s clear that Microsoft has failed to dislodge Google as the search engine of choice: While its market share in the U.S. is around 15% [WinRumors, quoting comScore] globally it’s tiny: less than 4% on desktop browsers, 1% on mobile devices [both from NetMarketShare]. In other words, Google doesn’t need to worry that Internet Explorer shifting traffic to bing. While in decline IE is still the most popular browser at about 40% [StatCounter].
  • Google doesn’t really care what browser people use. It would prefer they use Chrome, but as long as the browser points to Google, who cares (as Deng Xiao Ping said, who cares what colour the cat is, as long as it catches mice?). Which is why Google are just as happy to do a deal with Apple (6%) and with Opera (2%). In fact, the only browser that doesn’t have Google as its default search engine is IE. (Apple talked about cutting a deal with Microsoft last year [Daring Fireball], but it was probably a negotiating tactic. DF says he reckons the Google/Safari deal was worth $2 million a month.

Finally, then, if the new figures are true–that Google is now paying $300 million a year for the Firefox traffic–is that money well spent? Well, it’s not easy to calculate. But let’s assume that Firefox traffic continues to fall at its present rate. So in 2012 it accounts for only 21% of the market. Likely number of Internet users in 2012? Anyone’s guess, but probably about 2.4 billion? (It was 2.1 billion in March 2011, according to Internet World Stats.)

So Firefox potentially should be able to bring at least 440 million users to the table. So that’s $0.68 per user. Quite a bit more than what it’s currently shelling out–but less than what it’s paying Opera, according to my very rough calculations. Opera said it received $41 in ‘Desktop revenue’, the bulk of which it says comes from ‘search and commerce’. Assuming all of that, for the sake of argument, is money from Google for search, then using their official figure of 51 million desktop users in 2010, Opera was getting $0.80 per user from Google. (I realise that might be inflated given the ‘commerce’ component.)

That would seem to suggest that actually Google was getting users from Firefox pretty cheaply. Even if my calculations for Opera are a tad high, the new deal with Google, valuing a user at about 65 cents, doesn’t seem overly expensive. We don’t know how much Google pays Apple, but the $2 million a month means they’re the cheapest on the block, costing $0.15 per user according to back of the envelope calculations.

Indeed, these are all just back of the envelope calculations, but I reckon they offer a bit of insight into the economics of this part of the game. Remember Google made $9.72 billion in the last quarter [Google corporate pages], and paid out $383 million to “certain distribution partners and others who direct traffic to our website” in that quarter. That’s close to $1.6 billion over a year, putting the $300 million it’s reputed to be committed to paying Firefox every year in perspective.)

A good account of the economics of all this can be found at ExtremeTech.